Legislative update: House highway bill includes revenue provisions

Highway bill includes revenue provisions

House Ways and Means Chairman Paul Ryan (R-WI) and House Transportation and Infrastructure Committee Chairman Bill Shuster (R-PA) introduced a bill to extend the highway trust fund authorization through December 18, 2015, from its current expiration date of July 31, 2015.

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The bill—H.R. 3038—also contains provisions to raise approximately $8 billion in revenue to offset the cost of the additional five months of spending for surface transportation.

Revenue provisions

Basis reported by estates - The bill would require estates with positive estate tax liability to report to the IRS the value, on the owner’s death, of bequeathed property. This is intended to allow the IRS to track the basis of the inherited property more easily.

Mortgage reporting - The bill would require lenders to expand Form 1098 reporting to include: (1) the origination date, (2) outstanding principal, and (3) the property address that relate to the reported mortgage interest expense.

Tax-filing deadlines - The bill would modify the schedule for filing tax returns to: (1) March 15 (or two and a half months after the close of the tax year) for partnerships and S corporations and (2) April 15 (or three and a half months after the close of the tax year) for C corporations. In addition, the bill would direct the Secretary of Treasury to modify the rules governing extensions for returns for partnerships, trusts, employee benefit plans, tax exempt organizations, and others. The bill would also modify the automatic extension of filing deadlines for C corporations.

Statute of limitations in case of overstatement of basis - The bill would provide that an overstatement of basis is an omission of gross income for purposes of determining whether a substantial income omission was made on the return. Thus, an overstatement of basis that contributes to a substantial understatement of income could trigger the extended six-year statute of limitation.

Transfer of excess pension assets to retiree health accounts - The bill would extend the ability of employers to transfer excess defined benefit plan assets to retiree medical accounts and retiree group-term life insurance through 2025. Originally enacted in 2012, the underlying provision currently expires on December 31, 2021.

TSA fees - The bill would make certain budget accounting changes regarding Transportation Security Administration (TSA) fees. The provision would not change the TSA fees paid by airlines or passengers but would only address the budgetary treatment of the fees.

In addition to these revenue offsets, the bill would also decrease the excise tax on liquefied national gas (LNG) and liquefied petroleum gas (LPG) to 14.1 cents per gallon (from 24.3) and 13.2 cents per gallon (from 18.3), respectively, for sales or use of fuel after December 31, 2015.

Future legislative action

The House is likely to consider the bill later this week. It is unclear when a Senate Republican bill may be unveiled, although it is possible that it may be released as early as this week.

KPMG observation

By extending the authorization (and funding) for the highway trust funding for only five months, House leaders create both a need and an opportunity to readdress the issue before the end of this calendar year.

Ways and Means Chairman Ryan has stated his preference for revisiting highway funding this fall in conjunction with developing and enacting major modifications to the international provisions of the Internal Revenue Code. If those modifications can be made in a manner that would generate one-time tax revenues (such as through a tax imposed on untaxed accumulated foreign earnings of U.S. multinational corporations “deemed repatriation”), then a portion of those one-time revenues could be used to fund a multi-year extension of the highway trust fund beginning in December.

The action this week by the House sets up a potential conflict with the Senate. Senate Republican leadership has made it clear that they prefer a multi-year extension of the highway trust fund rather than the five-month extension proposed by the House. This is generally viewed as reflecting a desire of many in the Senate to postpose any future votes on the highway funding issue until after the November 2016 elections.

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